Just what the ‘ideal’ revenue split between sales and property management income should be in a real estate agency is too hard to determine, according to a number of senior industry executives.
The executives, from some of the country’s top networks, made the comments as part of their response to the recent Real Estate Business Top 20 Groups ranking.
Douglas Driscoll, of NSW-based Starr Partners, said while his group of 28 offices doesn’t set a specific ratio, “we would always recommend that an office doesn’t put too many of their eggs in the same basket”.
But the rent roll is increasingly important, he continued, with anecdotal evidence pointing to the average net profit from property management at Starr Partners being nearly double that of the net profit for sales.
Mike McCarthy, director and CEO at Victoria-based Barry Plant, also noted the disparity between his franchisees in this regard.
“We have extremely successful sales offices with strong property management businesses (500+) and the revenue ratio is approximately six to one in favour of sales,” he said.
“At the other end of the scale, we have franchisees with very successful offices ($1.5 million gross sales commission) where the ratio would be closer to one to one.”
Nick Dowling, CEO at Melbourne-based Jellis Craig, said they don’t have a revenue ratio but they do aim to cover a percentage of fixed costs.
“It depends on maturity of the business but we aim to have fixed cost coverage between 40-60 per cent from the property management business,” he said.
LJ Hooker CEO Georg Chmiel said his group’s focus is on meeting fixed costs.
“We provide knowledge and skills to our network on how to build property management to a level where it covers the general expenses of the business, which enables the business model to remain profitable irrespective of soft markets,” he said.
Some real estate groups didn’t feel comfortable setting these targets for its members.
“At Real Estate Results Network, we do not recommend a ratio,” said Michael Sheargold, founder and CEO of Real Estate Results Network.
“This is very much based on the goals of our individual members,” he said of his network of more than 30 independent agencies across Australia and New Zealand.
“We have members who have significant property management growth goals where others choose to have little or no property management in their overall business mix.”